Ask Money

A Roth conversion

Chris Farrell Jul 18, 2011

Question: I have a very small traditional ira and would like to convert it to a Roth ira…. is there a way to do this without penalty? Elle, Birmingham, AL

Answer: You can convert a traditional IRA (funded with pretax dollars) into a Roth IRA (funded with aftertax dollars) without paying a penalty. However, you will owe income taxes on the amount you convert.

A reasonable rule of thumb is that it doesn’t pay to convert unless you have the savings elsewhere to pay the income tax bill.

To get a better understanding of conversion check-out the free calculator here.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.